Downside appears limited if Nifty closes below 5150: Analysts

The 50-share Nifty index slipped to its 2-month low on Thursday, breaking key technical support levels of 5150 on weak global cues.

"Despite Nifty momentarily breaching the 5150 mark on an intra-day basis today, the outlook for Nifty remains positive. Even if Nifty closes below the 5150 mark, the downside appears limited to 2-3%," said Vinit Pagaria, VP - Investment Strategies, Microsec Capital Ltd

Nifty has been holding on to the crucial support band of 5150-5170 since the last few days. It tested a low of 5174.90 on Monday, 5184.65 on Tuesday and 5169.60 on Wednesday.

The 50-share Nifty index was down 0.9 percent at 12:40 hrs, breaking below the 200-day moving average for the first time since Feb. 1.

Some of the momentum oscillators like stochastics are in the oversold territory and indicate that a sharp upside is possible from here on in the short term.

"We continue to believe that traders should go long between 5000 and 5250 with upside targets of 5400, 5630 and finally 5900," added Vinit.

Microsec Capital advises traders to write Nifty April Put options of strike 5100 and strike 5200.

According to analysts, expiry of March derivatives contracts today and the end of the fiscal year at the end of the week is also adding to the volatility.

"Beginning today, it is a new settlement for the FIIs in the sense that whatever they buy now will go into the new financial year. In case FIIs do press the gas on the downside, the domestic market as well as the retail investors may not be able to absorb the selling pressure," said VK Sharma, Head of Business, Private Broking & Wealth Management, HDFC Securities.

"Chances are the markets would crash and we might see Nifty going down to levels below 5000," added VK Sharma.

National Stock Exchange data showed provisional net purchases of Rs 148 cr ($29.15 million) on Thursday, bringing total net sales for the week to about $39 million.

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BSE Sensex rises 0.3%; May inflation data in focus

The BSE Sensex rose 0.3% in early trade on Tuesday, with banks leading the rise, taking cues from strong Asian markets.

At 9:17 a.m. (0347 GMT), the 30-share BSE index was up 0.32% at 18,324.92 points, with 26 components advancing. The 50-share NSE index was up 0.4% at 5,502.75.

Financials such as State Bank of India, ICICI Bank and HDFC Bankwill be in focus as the data would provide cues on the Reserve Bank of India's (RBI) rate decision on Thursday.

The wholesale price index is expected to have risen 8.70% in May from a year earlier, up slightly from the previous month, thanks to rising food and fuel prices, a Reuters poll showed.

Economists expect the RBI to continue with its hawkish view as it attempts to control rising inflation.

Top mortgage lender Housing Development Finance Corp will be on the radar after sources said Citigroup has decided to reduce its stake in the firm to about 10% from 11.4% via stock market deals.

The MSCI's measure of Asian markets other than Japan was up 0.9% by 0304 GMT, while Japan's Nikkei rose 0.2%.

The Nifty India stock futures in Singapore were up 0.1%.

On Monday, the 30-share BSE index closed barely changed at 18,266.03 points.

STOCKS TO WATCH

* Tata Communications after the telecoms firm said it had increased its effective holding in South Africa's second-biggest fixed-line phone operator Neotel to 61.5% from 49%.

* Oricon Enterprises Ltd after the firm said it had alloted 2.2 million shares to Clearwater Capital.

Moneycontrol.com

Sensex hits one-week high; ITC scales record high

The key benchmark indices surged, snapping four days' losses as world stocks rose and as a slide in crude oil prices from 2-1/2-year peak helped ease macroeconomic concerns. The barometer index BSE Sensex struck one-week high. The Sensex was provisionally up 466.34 points or 2.42%, up close to 635 points from the day's low. The market breadth, indicating the health of the market, was strong.

Bank shares rose across the board on expectation of good Q4 results. Capital goods and auto stocks rose on renewed buying. IT stocks rose ahead of IT bellwether Infosys' Q4 result on Friday, 15 April 2011. Cigarette maker ITC scaled a record high.

The market recovered after hitting 2-week low at the onset of the trading session, tracking recovery in Asian stocks. The market moved into the positive zone to hit fresh intraday high in morning trade. The market extended initial gains to hit fresh intraday high in mid-morning trade. The market trimmed gains in early afternoon trade. The market struck a fresh intraday high in afternoon trade. The Sensex extended gains in mid-afternoon trade. The barometer index surged to hit one-week high in late trade.

As per provisional figures, the BSE 30-share Sensex was up 466.34 points or 2.42% to 19,728.88. The Sensex rose 468.83 points at the day's high of 19,731.37 in late trade, its highest level since 6 April 2011. The Sensex shed 168.91 points at the day's low of 19,101.63 in early trade, its lowest level since 29 March 2011.

The S&P CNX Nifty was up 136.80 points or 2.36% to 5,922.50 as per provisional figures. The Nifty hit high of 5923.60 in late trade, its highest level since 8 April 2011. The Nifty hit low of 5,735.55 in early trade, its lowest level since 29 March 2011.

The market breadth, indicating the health of the market, was strong. On BSE, 1,941 shares advanced while 977 shares declined. A total of 93 shares remained unchanged. The breadth was negative at the onset of the trading session.

Among the 30-member Sensex pack, 28 advanced while only two of them declined.

BSE clocked turnover of Rs. 3373 crore, higher than Rs. 2588.21 crore on Monday, 11 April 2011.
Index heavyweight Reliance Industries (RIL) rose 1.36% to Rs. 1020.80, off the day's low of Rs. 998 as refining margins are seen rising on the back of high crude oil prices. RIL recently bagged two blocks in the ninth round of oil and gas block auctions held by the government.

ONGC gained 1.78% after chairman A. K. Hazarika was quoted by the media as saying that the company will sign an agreement during the week-end to purchase a 25% stake in the Satpayev exploration block in Kazakhstan. The government has approved a total investment plan of $400 million. This includes a signature bonus of $13 million and $80 million as a fee for taking the stake in the block. The rest will be spent on exploration activities.

IT stocks rose ahead of IT bellwether Infosys' Q4 result on Friday, 15 April 2011. India's second largest software services exporter Infosys Technologies rose 2.29%, with the stock gaining for the second straight day. The market has been abuzz with talks Infosys will give encouraging guidance for the year ending March 2012 (FY 2012) given underlying strong demand for offshore outsourcing. Infosys will give annual guidance for FY 2012 at the time of announcing Q4 March 2011 results on Friday.

India's largest software services exporter TCS advanced 2.23%. The company will announce Q4 result on 21 April 2011. India's third largest software services exporter Wipro gained 3.19%. The company will announce Q4 result on 27 April 2011.

Cigarette maker ITC rose 2.81% to Rs. 190.15 on expectations of good Q4 results. The stock hit record high of Rs. 190.50 today.

India's largest dam builder by sales Jaiprakash Associates surged 7.58% after executive chairman Manoj Gaur was quoted as saying the company aims to maintain a growth rate of 40% and aims to scale down debt significantly in the year ending March 2012 (FY 2012). It was the top gainer from the Sensex pack.

Bank shares rose across the board on expectation of good Q4 results. India's second largest private sector bank by net profit HDFC Bank rose 3.65%. The bank will announce Q4 result on 18 April 2011. India's largest private sector bank by net profit ICICI Bank gained 2.68%. The bank will announce Q4 result on 28 April 2011.

India's largest state run bank by net profit and branch network State Bank of India (SBI) edged up 1.46%. Pratip Chaudhuri has taken over as the new chairman of State Bank of India the state-run bank said on 7 April 2011. Chaudhuri, 57, has been working with State Bank for 37 years and takes over from O.P. Bhatt. Before taking up the top role, Chaudhuri was deputy managing director in the international banking division of thebank.

Capital goods stocks rose on renewed buying. Punj Lloyd, ABB, Larsen & Toubro, BEML and Bhel rose by between 0.85% to 5.38%.

Auto stocks rose on strong domestic demand. India's top small car maker by sales Maruti Suzuki rose 3.41%, with the stock snapping last four days' losses. The company announced last week that it would recall 13,157 diesel engine cars. The company said it would inspect the 'connecting rod bolt' for units of its Swift and Ritz model diesel cars with engines manufactured between 13 November 2010 and 4 December 2010.

Maruti Suzuki increased the prices of its products by 0.2% to 2.4% from 4 April 2011, depending on the models to offset rising costs of key inputs viz. steel, aluminum, copper and natural rubber.
India's largest truck maker by sales Tata Motors gained 2.61%, with the stock snapping last three days' slide. The company had hiked prices of some car models by Rs. 7,000 to Rs. 36,000 from 1 April 2011.

India's top tractor and utility vehicles maker by sales Mahindra & Mahindra rose 2.73% with the stock snapping last two days' fall. The company has reportedly raised prices on most of its models by 1.5% to 2% recently to offset higher commodity prices.

India's largest bike maker by sales Hero Honda Motors gained 6.34% with the stock snapping last two days' losses after company today declared an interim dividend of Rs. 70 per equity share for the year ended March 2011. Hero Honda's total sales rose 24.4% to 5.15 lakh units in March 2011 over March 2010. The monthly sales in March 2011 were record monthly sales.

India's second largest bike maker by sales Bajaj Auto rose 1.6% with the stock snapping last three days' losses. The company's total vehicle sales increased 12% to 3.07 lakh units in March 2011 over March 2010. The company announced its March 2011 sales figures on 4 April 2011.
The market was closed on Tuesday, 12 April 2011, on account of Ram Navmi. The near term major trigger for the market is Q4 March 2011 results which will start trickling in starting this week when IT bellwether Infosys unveils earnings on Friday, 15 April 2011. Investors will scrutinize post-result management commentary to gauge outlook on earnings at a time when rising salaries, raw materials prices and interest rates are pressurizing profit margins of India Inc.

European stocks rose Wednesday, boosted by strength in the auto sector and tracking gains in Asia, as investors looked to the next round of US earnings reports. The key benchmark indices in UK, Germany and France were up by between 0.78% to 0.84%.

Japanese stocks led recovery in Asian markets on Wednesday on reports Japan's Renesas Electronics Corp. would restart a key factory that was hit by last month's quake in June 2011, a month earlier than expected. The key benchmark indices in Japan, China, South Korea, Indonesia, Singapore, Hong Kong and Indonesia rose by between 0.55% to 1.56%.

Meanwhile, Japan's government on Wednesday downgraded its assessment of the economy for the first time in six months, saying it is showing weakness after a devastating earthquake and tsunami last month battered the northeast coast.

US stocks dropped on Tuesday on worries falling oil prices could set off a reversal in the high-flying energy sector, while Alcoa's leaner-than-expected revenue disappointed. US trade deficit shrank in February as a slowdown in demand both at home and abroad hit imports and exports. The trade gap totaled $45.8 billion, down 2.6% from January despite another monthly rise in oil prices to their highest since October 2008, the Commerce Department said on Tuesday.
Trading in US index futures indicated that the Dow could gain 45 points at the opening bell on Wednesday, 13 April 2011.

Back home, high global commodity prices will add to pressure on profit margins of Indian firms caused by rising salaries and higher interest rates. Investors can take some solace in a recent slide in crude oil prices from 2-1-/2-year highs.

A surge in crude oil prices over the past few months has sparked inflation and interest rate worries. The Reserve Bank of India (RBI) is seen raising key short term policy rates by 25 basis points at its annual 2011-2012 monetary policy review on 3 May 2011.

India imports majority of its crude oil requirements and high oil prices have raised concerns about widening account deficit. High oil prices have also raised concerns about higher oil subsidy bill for the government and its negative impact on the government's fiscal position. US crude futures were up 29 cents or 0.27% at 106.54 a barrel.

Industrial production rose 3.6% in February 2011, lower than market expectations of a 4.8% growth, data released by the government on Monday showed. Manufacturing output, which constitutes about 80% of the industrial production, rose an annual 3.5% in February 2011. January's industrial output annual growth rate was revised upwards to 3.9% from 3.7%.
The data of Wholesale Price Index for the month of March 2011 is due on Friday, 15 April 2011. A Capital Market poll pegs a median rate of rise in inflation at 8.4% in March 2011, higher than an annual rise of 8.3% in February 2011.

The International Monetary Fund has marginally cut its 2011 economic growth forecast for India to 8.2% from 8.4% as persistent inflation pressure forced aggressive monetary tightening.
Good monsoon this year could help ease food inflation and boost rural income. Recent reports indicate that India will receive good rains during the July-September monsoon season this year.

The India Meteorological Department (IMD) will give its first official forecast for the June to September monsoon on 19 April 2011.

India Infoline

With Mukesh Ambani on board, Bank of America wants RBI nod for loans to Reliance Industries

Bank of America is trying to figure out the regulatory barriers in doing business with India's largest private company Reliance Industries (RIL) whose chairman Mukesh Ambani has joined the board of the parent, Bank of America Corporation .

According to Indian regulations, a bank in India is not permitted to lend to any of its directors and companies where directors have board presence.

BankAm India officials have discussed the matter once with the Reserve Bank of India and are likely to seek further clarifications soon. A bank spokesperson declined to comment on the matter.

A few legal and compliance heads of other banks that ET spoke to felt that going strictly by the law, BankAm India should have no problems in taking fund as well as non-fund exposure to RIL or any of Reliance's group companies. "In India, BankAm functions through branch offices, and Mr Ambani has been appointed as a director on the board of the bank's global holding company. So, technically, there is no problem, but RBI has to spell this out," said the legal head of a large local bank.

However, in the past, the Indian banking regulator has often favoured stern interpretations of the law. Under the circumstances, the MNC bank does not want regulatory issues to crop up at a later point.

Foreign banks, including BankAm, have business relationships at different levels with large Indian companies. Besides rupee loans from Indian branches, offshore offices of foreign banks give loans that are considered as external commercial borrowings by a company in India. Also, these banks, through their offices in other jurisdictions, fund cross-border acquisitions by Indian business groups. For some of the MNC banks, derivative transactions with Indian companies constitute a slice of their treasury operations.

A master circular of the Reserve Bank of India gives a list of the dos and don'ts. Apart from loans and guarantees, banks are also restricted from cutting complex derivatives deals with a company having a common director. Except forwards and other plain vanilla currency and money market transactions which are cash-settled, derivatives involving an extended credit period are not allowed.

"It depends on how RBI chooses to interpret the regulations. Currently, foreign banks have advisory boards in India which don't have the status of a statutory board. So, the board of a foreign bank refers to the board of the parent which is beyond RBI's jurisdiction," said a senior official of an European bank. Many foreign banks use their offices outside India to lend to Indian corporates and the central bank's rules on exposure to single company or a group doesn't apply.

In India, BankAm and Merrill Lynch (which BankAm acquired) carry out various businesses: banking through BankAm branches, investment banking and equity broking through DSP Merrill Lynch, and a non-banking finance company through DSP ML Capital . For RIL, which every bank wants as a corporate client, it makes little difference if it can't borrow from the US bank. But BankAm India will not like losing the RIL account to other lenders.

Industrial Output Growth in India Unexpectedly Slows to 3.6% in February

India’s industrial production growth unexpectedly slowed in February, a deceleration that may be insufficient to stop the central bank from raising interest rates further.

Output at factories, utilities and mines rose 3.6 percent from a year earlier after a revised 3.95 percent gain in January, the government said in a statement in New Delhi today. The median estimate of 30 economists in a Bloomberg News survey was for a 5.1 percent increase.

While production growth moderated, other data including the purchasing managers’ index, car sales and credit expansion have signaled that consumer demand is stoking price risks. Inflation probably accelerated to 8.36 percent last month, exceeding the central bank’s 8 percent forecast, according to the median estimate in another Bloomberg News survey.

“Although the output data are volatile, consumer demand remains strong,” said Meghna Patel, a Mumbai-based economist at STCI Primary Dealer Ltd. “We think the RBI will need to tighten rates more to gain control over inflation.”

She expects the central bank to raise borrowing costs by a quarter of a percentage point at the next monetary policy announcement scheduled for May 3. The Ministry of Commerce and Industry is due to release inflation data on April 15.

The Bombay Stock Exchange’s Sensitive Index fell 1 percent, extending losses for a fifth day. The yield on the 8.13 percent note due September 2022 rose 5 basis points to 8.17 percent as of 3:49 p.m. in Mumbai, the highest level since Feb. 11, while the rupee weakened 0.6 percent to 44.35 to the dollar.

Growth Momentum

Manufacturing rose 3.5 percent in February from a year earlier, slower than the 3.6 percent gain in January, today’s report showed. Mining gained 0.6 percent, while electricity output rose 6.7 percent. Capital goods production slid 18.4 percent.

“Even as industrial production continues to be volatile, other indicators, such as the latest purchasing managers’ index, direct and indirect tax collections, merchandise exports and bank credit, suggest that the growth momentum persists,” the central bank said in a March 17 statement.

India’s industrial output has fluctuated since May, when it registered a 12.2 percent expansion. The growth eased to 7.2 percent in June, rebounded to 15.1 percent in July, slid to 4.9 percent in September and then recovered in October, according to government data.

Rate Increases

The slowdown in factory output is a “concern,” and the March reading is likely to be even lower,Kaushik Basu, chief economic adviser to the ministry of finance told reporters in New Delhi today. It may pick up from April, he said.

Reserve Bank Governor Duvvuri Subbarao raised rates on March 17 for the eighth time in a year, boosting the repurchase rate by a quarter point to 6.75 percent after raising the inflation forecast twice since late January. The price gauge will reach 8 percent at the end of March compared with the 7 percent estimated on Jan. 25, he said.

“In the absence of a strong supply response, increasing demand will inevitably lead to higher prices,” Reserve Bank Deputy Governor Subir Gokarn said April 5. He said a “monetary response is warranted” should demand exceed supply and stoke inflation.

India’s $1.3 trillion economy may expand as much as 9.25 percent in the year ending March 31, 2012, the finance ministry said in February.

Capacity, Loans

Maruti Suzuki India Ltd. (MSIL), the nation’s biggest carmaker, plans to boost capacity by 21 percent in the current financial year as part of investment plans totaling as much as 40 billion rupees ($908 million), Chief Financial Officer Ajay Seth said in an interview on April 6. The company’s sales climbed to a record in March.

Recent data on bank loans show lenders are giving loans at a faster pace than the central bank’s target. Commercial loans rose 23 percent from the previous year as of March 11, more than the 20 percent rate prescribed by the Reserve Bank of India.

Manufacturing grew for a 24th straight month, with the purchasing managers’ index holding unchanged at 57.9 in March from February, when it accelerated at the fastest pace in three months, HSBC Holdings Plc and Markit Economics said April 1.

“Strong consumption and supply constraints are together responsible for the high inflation,” saidRamya Suryanarayanan, an economist at DBS Group Holdings Ltd. in Singapore. The central bank needs to extend rate increases to restrain prices, she said.

Budget Boost

Salaries in India this year may rise the most in the Asia- Pacific region, fueling consumer demand, a survey by Aon Hewitt LLC showed March 8. Spending under the government’sNational Rural Employment Guarantee Act of 2005 has surged almost fourfold to 399 billion rupees.

Demand may find more support from Finance Minister Pranab Mukherjee’s budget for the fiscal year ending March 31, 2012, that plans to spur spending and exempt incomes below 180,000 rupees from tax, higher than the previous threshold of 160,000 rupees.

Prime Minister Manmohan Singh’s coalition aims to put more money in the hands of voters to help them cope with rising prices and shore up support for five state elections in 2011.

Rising oil and commodity costs and sustained economic growth are escalating pressure on Asian central banks to boost borrowing costs. China on April 5 raised rates for the fourth time since October. Vietnam, Taiwan, South Korea and Thailand increased borrowing costs in March or April to curb inflation.

India relies on imports to meet three-quarters of its annual energy needs.

To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

Realty stocks extend recent gains

A bout of volatility as the key benchmark indices dropped once again after recovering from the day's low in morning trade, as oil prices hovering near 2-1/2-year sparked inflation and interest rates worries. The BSE 30-share Sensex was down 27.65 points or 0.14%, off close to 35 points from the day's high and up close to 40 points from the day's low. The market breadth was strong. Index heavyweight Reliance Industries (RIL) extended initial losses. Maruti Suzuki India fell after recalling some diesel cars. Print media shares rose across the board on renewed buying. Realty stocks extended recent gains on value buying.

The market edged lower in early trade as crude hovered near 2-1/2-year highs. A bout of volatility as the key benchmark indices dropped once again after recovering from the day's low in morning trade.

India imports majority of its crude oil requirements and a surge in crude oil prices over the past few months has sparked inflation and interest rates worries. The Reserve Bank of India (RBI) is seen raising key short term policy rates by 25 basis points at its annual 2011-2012 monetary policy review on 3 May 2011.

High oil prices have also raised concerns about higher oil subsidy bill for the government and its negative impact on the government's fiscal position. US crude futures were down 50 cents a barrel or 0.46% at $108.33 a barrel. The price had climbed 49 cents to $108.83 a barrel in New York on Wednesday, 6 April 2011, the highest settlement since 22 September 2008.

Good monsoon this year could help ease food inflation and boost rural income. Recent reports indicate that India will receive good rains during the July-September monsoon season this year. The India Meteorological Department (IMD) is expected to come out with its long term forecast of the summer monsoon rainfall season by the end of this month.

At 10:20 IST, the BSE 30-share Sensex was down 27.65 points or 0.14% to 19,586.98. The index gained 8.68 points at the day's high of 19,620.88 in early trade. The Sensex fell 69.21 points at the day's low of 19,542.99 in early trade.

The S&P CNX Nifty was down 12.60 points or 0.21% to 5,879.15.

The market breadth, indicating the health of the market, was strong. On BSE, 1469 shares advanced while 670 shares declined. A total of 78 shares remained unchanged.

Among the 30-member Sensex pack, 16 gained while only five of them declined. Bharti Airtel, TCS and HDFC Bank fell by between 0.96% to 1.74%. Hindalco Industries, HDFC and Tata Power Company rose by between 1.07% to 1.41%.

Index heavyweight Reliance Industries (RIL) fell 0.51%. RIL, last week, bagged two blocks in the ninth round of oil and gas block auctions held by the government.

Most auto stocks fell on profit taking after recent strong gains triggered by strong vehicle sales in the month of March 2011 and hike/likely hike in vehicle prices. India's top small care maker by sales Maruti Suzuki declined 1.01%, extending Wednesday's 1.4% fall. The company announced after market hours on Wednesday that it would recall 13,157 diesel engine cars. The company said it would inspect the 'connecting rod bolt' for units of its Swift and Ritz model diesel cars with engines manufactured between 13 November 2010 and 4 December 2010.

Maruti Suzuki increased the prices of its products by 0.2% to 2.4% from 4 April 2011, depending on the models to offset rising costs of key inputs viz. steel, aluminum, copper and natural rubber.

India's second largest bike maker by sales Bajaj Auto fell 0.05%. The company's total vehicle sales increased 12% to 3.07 lakh units in March 2011 over March 2010. The company announced its March 2011 sales figures on Monday, 4 April 2011.

India's largest truck maker by sales Tata Motors declined 1.08%. The company had hiked prices of some car models by Rs. 7,000 to Rs. 36,000 from 1 April 2011.

India's top tractor and utility vehicles maker by sales Mahindra & Mahindra shed 0.42%. The company had said on 1 April 2011 it will raise prices of its products within a week to offset higher commodity prices.

India's largest bike maker by sales Hero Honda Motors rose 0.25%, with the stock gaining for the thirteenth straight day. Hero Honda's total sales rose 24.4% to 5.15 lakh units in March 2011 over March 2010. The monthly sales in March 2011 were record monthly sales.

Realty stocks extended recent gains on continued value buying. Ackruti City, DLF, Indiabulls Rela Estate, HDIL and Unitech rose by between 0.43% to 2.43%.

Mahindra Satyam rose 2% after the Supreme Court directed the Central Board of Direct Taxes (CBDT) to maintain status quo over its demand of Rs. 617 crore in income tax till Friday, 8 April 2011. It also asked CBDT to work out Satyam's actual liability.

Print media shares rose across the board on renewed buying. Jagran Prakashan, Sandesh, DB Corp, HT Media and rose by between 1.69% to 5.73%.

Indian stocks had witnessed a sharp rally recently on the back of heavy inflow from foreign funds. As per provisional figures FIIs bought shares worth Rs. 528.47 crore on Wednesday, 6 April 2011. FIIs bought shares worth a net Rs. 1562.70 crore during two trading sessions on Monday, 4 April 2011 and Tuesday, 5 April 2011, the latest data from Securities & Exchange Boardof India (Sebi) showed. FII inflow in April 2011 totaledRs. 5650 crore (till 5 April 2011). FIIs had bought equities worth Rs. 6897.80 crore in March 2011. FII inflow in calendar year 2011 totaled Rs. 3149.10 crore (till 5 April 2011).

The near term major trigger for the market is Q4 March 2011 results which will start trickling in from about mid-April 2011. Investors will scrutinize post-result management commentary to gauge outlook on earnings at a time when rising salaries, raw materialsprices and interest rates are pressurizing profit margins of India Inc.

On the macro front, the government will unveil data on some wholesale price indices for the year through 26 March 2011 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST.

Standard & Poor's Ratings Services on Wednesday affirmed the 'BBB-' long-term and 'A-3' short-term unsolicited sovereign credit ratings on India. The outlook on the long-term rating is stable, it said. The ratings on India reflect the country's good economic growth prospects and its fairly strong external position. Positive investment trends further underpin the ratings, with foreign direct investment and portfolio investments covering a large share of the current account deficit. Nevertheless, the country's weak fiscal profile and structural problems temper its strengths. Structural problems not only constrain efficiency but also preclude a large share of the population from benefiting from the country's rising prosperity, it added.

A survey showed on Tuesday that growth in India's service sector slowed in March from February's blistering seven-month high as new business growth moderated slightly, while price pressures, particularly wages, continued to rise. The seasonally adjusted HSBC Markit Business Activity index, based on a survey of over 450 companies, slipped to 58.8 in March 2011 from 60.2 in February 2011, but remained above the 50 mark that denotes expansion for the 23rd consecutivemonth.

On the political front, the first phase of assembly polls took place in Assam on Monday, 4 April 2011 in 62 of the 126 assembly constituencies. The second and concluding phase of elections will be held on 11 April 2011 in the remaining 64 constituencies. Assam elections will be followed by elections in Tamil Nadu, Puducherry, West Bengal and Kerala in twomonths between April and May. While Assam will have two-phased poll, Tamil Nadu, Kerala and Puducherry in one phase and West Bengal in six phases ending on 10 May 2011. The vote count is scheduled for 13 May 2011 for elections held in all the five states.

Asian stocks were mixed on Thursday after Portugal became the latest European country to plead for a bailout. The key benchmark indices in China, Indonesia and Taiwan rose by between 0.09% to 0.2%. The key benchmark indices in Hong Kong Singapore and South Korea fell by between 0.04% to 0.5%.

Portugal's caretaker government gave in to market pressures on Wednesday and joined Greece and Ireland in seeking an emergency bailout. The decision came after the government was forced to pay much higher rates to sell more debt.

Japanese stocks rose 0.16% off day's high after the Bank of Japan further eased its monetary policy, while leaving policy rates unchanged at the end of its two-day meeting. The Bank of Japan said Thursday that its policy board unanimously voted to keep its overnight call rate range from zero to 0.1%, and it also established a special lending facility for financial institutions in areas hit by the 11 March 2021 earthquake and tsunami.

US markets inched forward in relatively light volume on Wednesday, with investors adding selectively and avoiding large bets ahead of earnings.

Trading in US index futures indicated that the Dow could fall 12 points at the opening bell on Thursday, 7 April 2011.

The European Central Bank is widely expected to raise its key refinancing rate by a quarter of a percentage point to 1.25% at a policy meeting today, 7 April 2011, in what would be the first rate increase since the middle of 2008.

India Infoline

RBI to conduct Rs 600 bn special repo auction today

The Reserve Bank of India (RBI) will be conducting a special fixed rate term repo auction at 4.75% per annum (p.a.) against eligible securities for Rs 600 billion on Monday, Sep. 7, 2009.

The move will provide liquidity to mutual funds (MF), non-banking financial companies (NBFC) and housing finance companies (HFC) either on incremental or on rollover basis.

The reversal of the auction will take place on Sep. 22, 2009. There is no amount outstanding under this facility as on Aug. 31, 2009.

The apex bank had increased the daily liquidity adjustment facility (LAF) till Mar. 31, 2010 up to a cumulative amount of Rs 600 billion on outstanding basis exclusively for the purpose of meeting requirements of MFs, NBFCs and HFCs.

RBI cuts CRR by 150 bps

In an anticipated move, the Reserve Bank of India, or RBI, has cut the cash reserve ratio, or CRR, by 150 basis points to 7.5% with effect from tomorrow in a bid to infuse liquidity into the markets.

On October 6, the RBI had cut the CRR by 50 bps to 8.5%. Today's 150-bps cut includes October 11's cut. The cut will inject liquidity into the system to the tune of Rs 60,000 crore.

Nilesh Shah of Envision Capital said, “The CRR cut is definitely a positive move, which is going to soothe some liquidity fears. The stock market also needs liquidity and this (the rate cut) will help to some extent. Whether this is going to help us beyond a day or beyond an intra-day basis is something that remains to be seen.”

“Directionally, the CRR cut is a positive move that helps the banking system, helps the overall economy and will probably help the market in short-term or intra-day,” Shah added.

The announcement came close on the heels of a sharp fall of over 1,000 points on the Sensex on Friday morning amid cues from falling global markets. Soon after the announcement, the Sensex recovered a bit, before falling again later.

Udayan Mukherjee, Managing Editor, CNBC-TV18, said, “The announcement will get gobbled up, or maybe prompt or induce a bit of short covering with the market going up.”

Mukherjee said that it was a welcome move but added he didn’t see it affecting the stock market substantially. “Of course, it aids the money market and injects a bit of liquidity to the system — 150 bps is a fairly meaningful chunk of money coming in,” he said, adding that from a stock-market perspective, the cut would produce some kind of positive sentiment for a short while, "but the problems of the stock market are different."

Finance Minister P Chidambaram also issued a statement on the CRR cut and welcomed the RBI's decision.

source: http://www.moneycontrol.com

Priority is to calm inflation nerves - RBI

MUMBAI (Reuters) - Volatile prices of food and commodity prices have pushed inflation higher and the most urgent priority for central bankers is to calm nerves on inflation, the Reserve Bank of India (RBI) governor said.

"The most urgent and short-term priority for central bankers at the current juncture seems to be to calm the nerves about inflation or to anchor inflation expectations, with an implicit recognition that a somewhat elevated headline inflation in the short-term may be difficult to avoid," Yaga Venugopal Reddy said in a speech delivered in Manchester on July 1.
A copy of the speech was posted on RBI's Web site wwww.rbi.org.in on Friday.
"Further, high inflation rates when accompanied by higher variability of inflation raises greater uncertainties. These acute policy dilemmas at the current juncture between growth and inflation have to be faced in the background of financial turbulence which is yet to calm down," he added.
India's annual inflation rate rose to 11.63 percent on June 21, its highest since the annual numbers in the current series began in 1995. It was 11.44 percent a week earlier.
Reddy said higher and volatile prices of food, energy and other commodities were causing a significant upside bias to inflation around the world, complicating the conduct of monetary policy at the time of financial stress.
"Further, while rising energy prices may be an exogenous shock for several countries, for the global economy as a whole it is endogenous," he said.
Reddy said underlying demand conditions in India had warranted the RBI's policy tightenings in June.
The RBI raised its key lending rate twice in the month, increasing it 75 basis points to 8.50 percent, its highest since March 2002. It also announced a 50 basis point increase in banks' reserve requirements.
Reddy said India had largely avoided the global financial contagion from the subprime crisis, partly because its credit derivative market was in its infancy, its financial distribution model not comparable with advanced economies and because of curbs on local investors buying financial products issued overseas.